Starbucks Enters Latin America’s $4B Ready-to-Drink Coffee Market with the Help of PepsiCo

Distribution to First 10 Latin American Markets Expected in 2016

Starbucks and PepsiCo have entered into an agreement for the marketing, sale and distribution of Starbucks ready-to-drink (RTD) coffee and energy beverages including Starbucks Frappuccino chilled coffee drinks, Starbucks Double Shot Espresso and Cream, and Starbucks Refreshers beverages in Latin America.

The RTD coffee and energy beverage category in Latin America is an estimated US$4 billion business and is projected to grow by 22% over the next five years.

The agreement leverages the respective strengths of Starbucks and PepsiCo to bring a carefully selected portfolio of Starbucks RTD coffee and energy beverages to consumers in Latin America, unlocking new market opportunities for each company. Starbucks will provide coffee expertise and PepsiCo will sell and distribute Starbucks RTD coffee and energy beverages leveraging its expansive network and experience across the region. Together, both companies will continue to market, innovate and further develop the brand in Latin America.

In 2016, consumers in select markets in the Caribbean, Chile, Colombia, Costa Rica, Guatemala, Mexico, Panama, Peru, Puerto Rico, and Uruguay will see a portfolio of Starbucks RTD coffee beverages. Over time, the companies plan to expand to other markets in Latin America.

“The North American Coffee Partnership is arguably one of the most successful joint ventures in the beverage industry”

“Our expansion throughout Latin America in 2016 enables us to deliver high-quality Starbucks coffee in a convenient ready-to-drink format to our customers where they live, work and play,” said Michael Conway, president, Global Channel Development at Starbucks. “PepsiCo’s sales expertise and distribution network makes them the ideal company to work with to unlock the Latin American ready-to-drink market and accelerate local demand for Starbucks.”

Starbucks relationship with PepsiCo began more than 20 years ago when the two companies formed the North American Coffee Partnership (NACP), a joint venture that built the RTD coffee category in the U.S. The NACP now has approximately 97 percent market share in RTD coffee, and the RTD coffee category is one of the fastest growing liquid refreshment beverage categories in the U.S. The NACP has grown to more than a $1.5 billion retail business, in terms of annual retail sales as of June 14, 2015. What began with the launch of Starbucks Frappuccino chilled coffee drinks, now includes a diverse portfolio of coffee and energy beverages: Starbucks Frappuccino, Starbucks Double Shot, Iced Coffee, Iced Espresso Classics, and Starbucks Refreshers. Starbucks and PepsiCo will leverage the scale and innovation of the NACP for this new Latin American agreement.

“The North American Coffee Partnership is arguably one of the most successful joint ventures in the beverage industry, and with this new agreement, we bring more than 20 years of partnership success to a region where coffee is part of the culture,” said Laxman Narasimhan, CEO of PepsiCo Latin America. “Together, our highly talented and passionate teams will expand upon the vision set decades ago to create a new blueprint for continued growth in Latin America.”

Since launching its retail operations in Latin America in 2002, Starbucks retail presence has grown to more than 870 stores in 14 markets. Latin America is an important growing region for Starbucks coffee as it supplies more than half of the approximately 400 million pounds of high-quality arabica coffee that Starbucks purchases every year. PepsiCo and its predecessors have been operating in Latin America for more than 100 years, and its beverages operations and franchises span across all countries within the region and in select markets throughout the Caribbean Islands.